From Beat Siegenthaler at TD Securities:
The CBR has confirmed Chairman Ignatiev holding a press conference at 6pm Moscow time (3pm UK). This is highly unusual and suggests that an important announcement will be made. The market has been awash this afternoon with rumours about a free-float of the RUB and indeed this seems a likely scenario though we would call it a dirty rather than free float. The Russian government is horified of a sharp depreciation (10-15% may be necessary for a sustainable level) and at least initially will do everything to avoid an overshoot on the weak side. We think the CBR will hike rates immediately from currently 13% on the benchmark to maybe 15% and will also continue to intervene in the FX market. So the immediate impact on USD/EUR/RUB may actually be muted though we would expect the RUB to weaken over the next weeks. Note that the timing is a good one as Russian corporates need to make their VAT tax payments in end-Jan and as corporates have recently scrambled to exchange their cash RUB into hard currency to avoid depreciation, they now need desperately need RUB amid poor liquidity. So initially the Rouble may not sell off sharply but beyond the VAT payments over the next few weeks we think USD/RUB will go higher.

This entry was posted by Sam Jones on Thursday, January 22nd, 2009 at 15:04 and is filed under Capital markets. Tagged with rouble, russia. Edit this entry.